The formula
Client retention rate = (clients at the end of the period - new clients won in it) / clients at the start x 100
How to calculate client retention rate
Count three numbers for one period: the clients you had on day one, the clients you have on the last day, and the new clients you won in between. Take the new ones off the end count, so you're only counting clients who were there at the start, then divide by the start count.
Worked example, with made-up figures: you start the year with 200 clients and end it with 210. You won 30 new clients during the year. (210 - 30) / 200 = 180 / 200, so your retention rate is 90%. You lost 20 of the clients you started with, a churn rate of 10%.
Leave the new clients in and it reads 210 / 200, or 105%, which hides the 20 who left.
How to measure retention in your team
- Decide what counts as a client. For a one-off purchase, it's someone who bought again within a set time, such as 12 months. For a contract or subscription, it's someone still paying on the last day.
- Keep the period fixed. A monthly rate and a yearly rate aren't the same number: keeping 98% a month compounds to about 78% a year (0.98 x itself 12 times).
- Count revenue as well as clients when clients differ in size. Net revenue retention takes the monthly revenue from the clients you started with, then adds what they bought more of and takes off what they cut or took with them when they left. From $50,000 a month, lose $4,000 and $1,000 of cuts, add $6,000 of upsells, and you keep $51,000, or 102%.
- Write down why each lost client left. One line per client is enough, and after a quarter you'll know which reason to fix first.
Upsell rate: how many clients bought more
Upsell rate = clients who bought more in the period / clients at the start x 100
Worked example, with the same made-up 200 clients: 24 of them upgraded or added something during the year, so the upsell rate is 24 / 200 = 12%. Retention tells you how many stayed, and upsell rate tells you how many of them grew. Watch the two together, because a client who's buying more is rarely the one about to leave.
What a good retention rate looks like
We don't print an industry retention rate. A figure averaged across other markets, contracts and prices won't tell you whether yours is good. Set the bar from your own last four quarters, and read it by who owns each client.
| Who's looking | What they check | What good looks like |
|---|---|---|
| Owner or sales manager | Yearly retention and net revenue retention | Both steady or rising, with the reasons for losses written down |
| Account manager | Renewals decided before the due date | No renewal reaching its date without a conversation |
| Rep who sells and looks after clients | Clients not contacted in the last 90 days | That list getting shorter every month |
Where clients slip away, and the check that catches it early
Most lost clients go quiet long before they leave. The places it usually starts:
- The first 90 days, when a new client decides whether they made the right call.
- A long gap with no contact, so the first thing they hear from you is a renewal or a price rise.
- A price rise with no conversation before it.
- A change on their side, such as a new decision maker or a smaller budget, that nobody asked about.
The check: once a month, list every client you haven't spoken to in 90 days and put a dated follow-up on each one. It takes an hour, and it finds the clients who are drifting while there's still time to call.
Work out your retention rate
Retention: 90%
- Churn: 10%
- Upsell rate: 12%
Where it shows up in your week
The CRM keeps every message, meeting and note about a client on their page, and shows the clients you haven't spoken to lately at the top, so the monthly check is a list you already have.
Related KPIs, terms and tools
Questions managers ask
Sources
The page states no outside figure, so there's nothing to cite here.